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  • Payments you need to report

    Report only payments you make to contractors for building and constructions services.

    Contractors can be sole traders (individuals), companies, partnerships or trusts.

    If invoices you receive include both labour and materials, whether itemised or combined, you report the whole amount of the payment, unless the labour component is only incidental.

    The definition of building and construction services is broad – it includes any of the activities listed below if they are performed on, or in relation to, any part of a building, structure, works, surface or sub-surface:

    • alteration
    • assembly
    • construction
    • demolition
    • design
    • destruction
    • dismantling
    • erection
    • excavation
    • finishing
    • improvement
    • installation
    • maintenance (excluding the maintenance, service or repairs of equipment and tools)
    • management of building and construction services
    • modification
    • organisation of building and construction services
    • removal
    • repair (excluding the service or repairs of equipment and tools)
    • site preparation.

    Next step:

    Example: Paying a subcontractor

    Rob's Installation Services (principal contractor) contracts Simon (first-tier subcontractor) to install products. However, Simon is not coping with the amount of work and subcontracts some of the work to Bill (second-tier subcontractor). Rob's Installation Services needs to report on the payments it makes to Simon. If Simon is carrying on a business that is primarily in the building and construction industry, he is required to report the payments he makes to Bill.

    Example: Certification

    J & L Builders was contracted by a property developer to build a 15-storey building. J & L Builders engaged D & R Pty Ltd, to certify each stage of the building work. D & R Pty Ltd followed the project through to the end, carrying out the building inspections and issuing the occupancy permit. J & L Builders is required to report the total payments it made to D & R Pty Ltd for the inspections and certification.

    Example: Inspections and certifications

    RS Electrical Pty Ltd is a business that performs work related to the design, installation and maintenance of electrical systems. The company engaged James to inspect the electrical work on a building project and provide electrical certification. The payments they made to James are reportable.

    Example: Testing and tagging

    LA Plumbing Pty Ltd is a business primarily in the building and construction industry, and has engaged George to test the electrical equipment and tools they use in their business and to tag these. George's business is to test electrical appliances to ensure they are safe. The payments LA Plumbing Pty Ltd makes to George for testing and tagging their electrical equipment and tools are not reportable because the activity is not a building and construction service.

    Example: Equipment hire with or without an operator

    An equipment hire store provides plant and machinery for hire to the building and construction industry – for example, bobcats, scaffolding and tippers (commonly known as ‘dry hire’). The store can also provide the equipment with an operator (commonly known as ‘wet hire’) for an additional fee. A builder who hires a bobcat with an operator (wet hire) needs to report the payment it makes to the equipment hire store because the builder is paying for a building and construction service, not just the equipment hire. Wet hire is a building and construction service.

    End of example

    Incidental labour

    A payment for labour is considered to be incidental if the labour component is immaterial to the actual supply of the material.

    If a concrete truck is used to deliver concrete, and the driver merely directs the pouring of the concrete into the trenches, the driver’s labour component is incidental, or minor, to the supply of the concrete. The builder is paying for concrete and does not need to report the amount paid.

    If, for some reason, the driver pours the concrete, levels and does the formwork, then this is more than incidental. The builder is paying for the concrete as well as a building and construction service, and the total amount paid is reported.

    Example: Incidental labour component

    Kevin purchases a stock of new taps from Harry's Hardware to install in a commercial building. Harry installs one tap by way of demonstration, so that Kevin knows how to install the rest. Harry's Hardware invoices Kevin for the taps and includes a small amount for the labour to demonstrate the installation. Kevin does not need to report the payment he makes to Harry's Hardware because the labour component of installing the tap is incidental to the supply of the materials.

    Example: Not incidental labour component

    An electrical business provides labour and materials for various electrical applications. A builder pays the electrical business for the supply and installation of wiring in a commercial fit-out he is managing. Because the provision of the installation service is a building and construction activity and more than incidental to the supply of materials, the builder will be required to report the total payment made to the electrical business. The builder is carrying on a business that is primarily in the building and construction industry.

    End of example
    Last modified: 30 Mar 2017QC 51595